Feds investigating McDonald's franchise over payroll debit cards

Inquiry comes after lawsuit filed over cards that carrying fees for usage.

June 23, 2013|By Bob Kalinowski, Of The Citizens' Voice | By Bob Kalinowski, Of The Citizens' Voice

Federal investigators are looking into whether a McDonald's franchise in Luzerne County is breaking any laws by forcing employees to accept paychecks in the form of fee-carrying debit cards.

Meanwhile, lawyers for the franchise owners say the lawsuit's contention that employees incur fees on all transactions is wrong and there are several ways workers could access their money for free.

Attorney Michael Cefalo of West Pittson recently filed the class action lawsuit in Luzerne County Court on behalf of Natalie Gunshannon, a Dallas Township woman who quit her job at the McDonald's in Shavertown after the company issued her a debit card as pay and refused to pay her by check or direct deposit.

Days after the suit was filed and appeared nationally in the media, Cefalo said an investigator with the U.S. Department of Labor contacted his law office.

"They called me and told me the U.S. Attorney has shown a particular interest in the facts of this case," Cefalo said. "They were looking to see if there are any violations of federal statutes."

The U.S. Attorney's Office for the Middle District of Pennsylvania asked the Department of Labor to "look into it to determine if federal action is appropriate," Heidi Havens, a spokeswoman for the U.S. Attorney's Office, said.

"At this point, it is too soon to tell what specific action, if any, there would be," Havens said.

Lenore Uddyback-Fortson, a Department of Labor spokeswoman, said the department was aware of the McDonald's case, but could not confirm or deny if there is an active investigation.

"The agency has seen more of the use of debit cards to pay employees within the past several years as it is growing in practice," Uddyback-Fortson said. "As long as the fees do not cause wages to drop below $7.25 per hour, the federal minimum wage, the practice does not violate the Fair Labor Standards Act."

Gunshannon, 27, believes she was paid $7.45 per hour, but wasn't sure because she said the rate was not on a pay stub she received.

The J.P. Morgan Chase payroll cards issued to local McDonald's employees carry fees for nearly every type of transaction, according to the lawsuit, including a $1.50 charge for ATM withdrawals, $5 for over-the-counter cash withdrawals, $1 to check the balance, 75 cents per online bill payment and $10 per month if the card is left inactive for more than three months.

What the lawsuit fails to mention is that there are options to obtain money from and use the card for free, said attorney Matthew Hank, a Philadelphia attorney who represents the defendants, Albert and Carol Mueller of Clark Summit.

"Any belief that we force our employees to use debit cards that require fees is incorrect. If those debit cards are used properly, there are no fees," Hank said. "It's possible to use the debit card to withdraw your wages and pay no fee."

State law, according to the lawsuit, requires wages be paid in "lawful money" or with a check. The definition of "lawful money" is unclear, but the state Department of Labor and Industry and state banking regulators have endorsed payroll cards as a legal form of wage payment, according to the American Payroll Association, an industry trade group.

Cefalo's lawsuit contends employees are entitled to a choice.

A spokesman for J.P. Morgan Chase, which issues debit cards to the local McDonald's and other employers around the country, said a majority of their clients offer employees a choice.

"We provide payroll cards as an option for clients to pay their employees. But we don't manage their payroll programs," said spokesman Michael Fusco. "Most clients offer other channels to be paid, either direct deposit of pay by check."

Fusco noted J.P. Morgan Chase and employers negotiate a variety of ways employees could obtain their money for free while using the card. One way is free withdrawals from any VISA member bank, he said.

"There are some fees if you choose to use those options, but there are also free options," Fusco said.

Hank said the Muellers, who own 15 other McDonald's franchises in Northeastern Pennsylvania, have a good reputation in the community and haven't done anything wrong.

"Mr. and Mrs. Mueller have been good citizens of the community for decades," Hank said. "They are committed to abiding by all laws government employment and payment of wages."

The Muellers released another statement last week as the controversy continued to reverberate nationwide.

"Rest assured, we take allegations like these and matters regarding our employees, seriously. As owners of this long standing family-run business, we currently operate several McDonald's restaurants in Northeastern Pennsylvania. For decades, our family has proudly supported and contributed to communities where we do business, and will continue to do so," the statement said.

"We strive to comply with all laws related to employment and pay and work hard to provide a positive work experience for all our employees. We have many employees who have been with us a long time and are proud to work with our organization. Beyond that, it would be inappropriate to further comment. However, we strongly caution people from jumping to conclusions without all the facts."